Prepare for the Property and Casualty insurance license exam with these flashcard questions. This covers homeowners insurance, auto policies, liability, and claims procedures.
Q: Insurance
Answer: The transfer of risk through a legal contract
Q: Property
Answer: Covers real property and personal property against damage or loss resulting from covered causes of loss called perils
Q: casualty
Answer: covers non-property losses (3rd Party)
Q: Personal lines
Answer: Insurance for families and individuals
Q: Commercial Lines
Answer: Insurance for Business
Q: Risk
Answer: Uncertainty of financial loss
Q: Pure Risk
Answer: Chance of loss only (insurance only covers)
Q: Speculative Risk
Answer: Chance of loss or gain
Q: law of large numbers
Answer: as the number of homogenous loss exposures increases, the more accurate claims can be predicted from the group
Q: Perils
Answer: causes a loss
Q: Named Peril
Answer: lists the perils that are covered
Q: open peril
Answer: cover all perils except those specifically excluded by the policy
Q: hazard
Answer: Are not causes of loss but are things that increase the chance of a peril happening.
Q: Physical Hazard
Answer: something you can physically look at
Q: Moral Hazard
Answer: dishonest tendencies
Q: morale hazard
Answer: attitude of carelessness
Q: Direct Loss
Answer: immediate physical damage to property
Q: indirect loss
Answer: loss that happens after the direct loss but due to the loss of use of the property. Also called consequential
Q: proximate cause
Answer: the first cause in an unbroken chain of events
Q: Elements of a legal contract
Answer: Competent parties, Agreement, Legal Purpose, consideration
Q: Binder
Answer: temporary contract of insurance. Pending issue of the policy, good for 30 days
Q: DICE
Answer: 4 major parts to an insurance policy
Q: Declarations
Answer: 6 P’s policy number, parties, property description, policy term, policy limits, premium
Q: Insuring Agreement
Answer: Promise to Pay, Perils, Liability
Q: Conditions
Answer: Rules of the Game, Insured’s duties in a loss, Insurer’s subrogation rights, mortgagees rights
Q: Exclusions
Answer: Contains property and perils not covered.
Q: Direct Liability
Answer: Insured is the wrongdoer
Q: Vicarious Liability
Answer: insured is responsible for actions of wrongdoer
Q: contractual liability
Answer: insured assumes another’s liability under a written agreement
Q: Absolute Liability
Answer: liability w/o fault
Q: strict liability
Answer: product defect claims
Q: Legal Duty Negligence
Answer: owe an obligation to act or not act
Q: breach of duty negligence
Answer: failure to comply with the duty
Q: actual loss negligence
Answer: another suffers a loss
Q: proximate cause negligence
Answer: the breach of duty is the direct causer of the loss
Q: accident
Answer: event that is sudden and unexpected
Q: occurence
Answer: an event that happens over time
Q: Admitted Carrier
Answer: authorized insurer, issued a certificate of authority to transact business in the state.
Q: nonadmitted carrier
Answer: unauthorized insurer, not regulated to get certificate of authority, can only transact surplus lines insurance
Q: Domestic
Answer: same state
Q: foreign
Answer: another state
Q: alien
Answer: another country
Q: State regulation
Answer: State legislature passes the laws
Q: Commissioner
Answer: Runs Tx Dept of Ins. Appointed by Governor, does not write laws
Q: Texas Property and Casualty Insurance Guaranty Association
Answer: Protects claimants and policy holders in the event of insurer insolvency
Q: Board of Directors
Answer: 5 members from insurers, 4 from the public
Q: Assessment
Answer: authorized insurers in the state are required to pay into the fund. The amount they pay is based upon their share of the market in texas
Q: 2 common methods of rate regulation
Answer: prior approval & file and use
Q: DP-1
Answer: basic policy, covers fire, lightning, explosion
Q: DP-2
Answer: Broad, damage by burglars, falling objects, accidental discharge, freezing of home systems, damage caused by ice, sleet, snow
Q: Dp-3
Answer: Special, all perils except ones specifically excluded
Q: HO-2
Answer: Broad Named Peril Coverage
Q: HO-3
Answer: Special and most common coverage
Q: HO-4
Answer: Renters policy
Q: HO-5
Answer: Comprehensive of all property including mysterious disapperance
Q: HO-6
Answer: Condo insurance
Q: HO-8
Answer: For older homes
Q: Coverage A
Answer: covers dwelling and anything attached plus permanent fixtures
Q: Coverage B
Answer: Other Structures: anything not attached to house, 10% of coverage A
Q: Coverage C
Answer: Personal Property; 10% of C or $1000 for stuff off premises
Q: Coverage D
Answer: Loss of use; Fair Rental Value, Additional living expenses
Q: Coverage E
Answer: Personal Liability; covers claims for bodily injury to others
Q: Coverage F
Answer: Covers Med Pay to others up to 3 years
Q: Flood Limits
Answer: 250,000 structure, 100,000 contents
Q: Fair Access to Insurance Requirements
Answer: Insureds meeting underwriting criteria and declined twice by authorized insurers cannot be declined by the plan.